April 27th, 2020 | 07:30 CEST
BP, Exxon, Saturn Oil & Gas - North America and EU ready for oil deal?
Something is brewing in North America, because nothing less than social and economic independence is at stake. COVID 19 has shown that dependencies in the supply chain pose great dangers. On the one hand, modern society had to learn how difficult it is to obtain masks and, on the other hand, Saudi Arabia ruined the price stability of crude oil by increasing its production volume. An act that deliberately came at an inopportune moment, because with the measures to stem the spread of the corona virus, the demand for the black gold had already fallen by over 20%. The price level of recent weeks at USD 20 per barrel for WTI will drive a large part of the US oil industry into ruin and increase dependence on the OPEC states.
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Author:
Mario Hose
ISIN:
US30231G1022 , GB0007980591 , CA80412L1076
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Author
Mario Hose
Born and raised in Hannover, Lower Saxony follows social and economic developments around the globe. As a passionate entrepreneur and columnist he explains and compares the most diverse business models as well as markets for interested stock traders.
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Canada and USA theoretically self-sufficient
Before the Corona Crisis, Canada's production volume was around 4.5 million barrels a day and the USA produced over 10 million barrels. In terms of volume, production should be sufficient to protect itself from imports through an embargo, but due to the distances between the oil fields and the metropolitan areas the western part of Canada still imports oil from Saudi Arabia.
In total, the two North American states imported 2.5 million barrels of crude oil per day. Should a deal be struck between the two countries and an embargo ban crude oil from overseas, this will significantly strengthen the domestic market.
OPEC increases power by all means
The transatlantic relationship can also be used by the EU to initiate a deal with Canada and the USA to also reduce dependence on OPEC countries. The cartel of 13 oil-producing countries is celebrating its 60th anniversary this year. Even if the price of oil is currently depressing the mood of its members, it is certain that power and influence over the global oil market will increase.
Ultimately, countries such as Saudi Arabia can produce cheaply and thus drive overseas competitors to ruin. The oil market was as big as all other commodity markets combined before COVID-19.
Economic independence in danger
The danger of a strong OPEC is obvious. The member countries are predominantly led by dominant families and despots. In some countries civil war or similar conditions prevail - no trace of human rights. For this reason, it can be assumed that the competitive advantage will be exploited after the collapse of the American and European producers and that consumers outside the OPEC countries will have to pay for the dependence.
The EU and North America are therefore well advised to protect domestic producers and their own independence. Oil is the blood in the veins of the economy. As soon as society has recovered from the Corona Crisis, the demand for oil will rise again.
ESG as a quality standard
A modern society should also be concerned about the origin of the raw material. Model companies are for example BP and Exxon. The Canadian oil producer Saturn Oil & Gas produces in Saskatchewan and has taken up the idea of ESG (Environmental Social Governance). For this reason, the young company has appointed the expert Jim Payne to the Board of Directors.
Jim Payne is the CEO of dynaCERT, a CleanTech company that has developed an award-winning hydrogen technology that reduces the emission of pollutants from internal combustion engines. By February 2021, Saturn's management has entered into price hedging at over 65 CAD per barrel. This risk awareness is a blessing for the company's planning security and shareholders.
Fairtrade crude oil is overdue
Anyone who attaches importance to the fact that eggs come from free-range hens and coffee or bananas are subject to fair trade should also be aware that oil from companies with ESG claims is a contribution to a better society. The current situation, which shows how easily highly developed industrial nations can become a pawn in the game, should be seen as a wake-up call for collective and overdue action: now and today.
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